• The Zambian kwacha depreciated from 18 units of the local currency for every dollar on Jan. 1, to slightly more than 21 units per dollar by March 31.
• A report by Bloomberg has said the kwacha is set to realize its first quarterly decline since Q1 of 2020.
• President Hakainde Hichilema seemingly blamed the „cumbersome and bureaucratic“ debt restructuring process for causing delays in finalizing his country’s planned reforms, which is putting pressure on the local currency.
Zambian Currency Poised for Quarterly Decline
The Zambian kwacha, one of Africa’s best-performing currencies in 2022, is now expected to see its first quarterly decline in nearly two years. By March 31st, the kwacha had depreciated from 18 units of the local currency for every dollar on Jan. 1, to slightly more than 21 units per dollar according to a report by Bloomberg.
Zambia’s Debt Default
In 2020, fears that Zambia could become Africa’s first sovereign defaulter led to a drop in value against major currencies. However, following Edgar Lungu’s departure as president in August 2021, the Zambian kwacha surged back up from 19.34 units per dollar (ZMW19.34:$US1) to 15.3:1 on Sept 2 2022 due to reports that International Monetary Fund (IMF) had approved a bailout package for Zambia. Since then however the currency has been losing ground against other major currencies such as US Dollar and Euro due to stalled debt restructuring negotiations and increased inflation rate .
President Hakainde Hichilema published an op-ed blaming the „cumbersome and bureaucratic“ debt restructuring process for delaying his country’s reforms leading to pressure against the local currency and inflation rate increase as well as prompting a rate hike by Zambian Central Bank .
Impact Of Stalled Negotitations
The impact of stalled negotiations can be seen through increased pressure on local currency with Kwacha’s value dropping versus major currencies leading it towards its first quarterly decline since Q1 of 2020 while inflation rate is also increasing in response .
In conclusion ,the weakened Kwacha along with an increasing inflation rate are likely going to prompt another rate hike by Zambian Central Bank unless debt restructuring negotiations conclude successfully soon enough .